Gold and Silver are popular precious metals for commodity trading. However, they are no longer effective hedging tools against market fear (eg. inflation or uncertainty), when common pool of investors are fearful of stock market, especially during global financial crisis, commodity market (including gold, silver, crude oil, etc) would fall as well.
Over the long term, gold and silver move in similar mega direction for price trends. They have more unique mega market cycle of 30 years (dual peaks in 1980s and 2010s), therefore longer term investor of gold and silver must know their optimism level to lower the systematic risk due to market cycle. Both gold and silver have crashed in year 2013, after reaching the 30 years mega peak.
From investing point of view, despite gold and silver relatively at moderate optimism in long term but when global commodity market (eg. crude oil) and stock market are falling, the fear from similar group of investors may correct the gold and silver prices.
Relatively, gold and silver also have relative competition, maintaining gold/silver price ratio of about 20 to 100 over the past 50 years. Currently, gold/silver ratio is near to the historical (50 years) peak of 100, implying gold has more downside relative to silver. Some smart investors apply the spreading (20-100) of gold/silver ratio for trading, eg
1) Sell Gold Buy Silver
when gold/silver ratio is crossing below 80
2) Buy Gold Sell Silver
when gold/silver ratio is crossing above 40
After the major correction, since Year 2016, Gold has been bullish for the past few years, suitable for momentum trading to buy high sell higher. In the same period, Silver is also recovering but more cyclic in nature (silver is as if a more cyclic “penny stock” while gold is a more stable “blue chip”), suitable for swing trading over the past few years.
From trading point of view, gold has higher risk of falling for short term to mid term as gold prices are falling below US$1550/oz, the neckline of double top at high optimism (crossing below 75% optimism around $1600 was an earlier signal for exit for trading).
Unlike stock, gold and silver are pure trading tools, no business fundamental behind. So, follow Technical Analysis to position if interested. Gold has to break higher than US$1600 to resume the uptrend, therefore traders may wait if there is a reversal.
Long term trend for silver is similar to gold but short term silver is much weaker in price strength compared with gold. Currently both gold and silver are under shorting pressure due to short term bearish signals.
There are several major investment markets (commodity – eg gold / silver, stock, property, forex, bond, bitcoin, etc) with unique market cycles but they share 3 universal formula to make money from investing or trading:
1) Buy Low Sell High (Cyclic Investing)
2) Buy Low & Hold (Growth Investing)
3) Buy High Sell Higher (Momentum Trading)
==================================
Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.
Learn further from Dr Tee valuable 7hr Online Course, both English (How to Discover Giant Stocks) and Chinese (价值投资法: 探测强巨股) options, specially for learners who prefer to master stock investment strategies of over 100 global giant stocks at the comfort of home.
You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.
